Inflation slows in May, with consumer prices up 3.3% from a year ago

U.S. CPI rose 3.3% YoY in May, lower than market expectations of 3.4%. Excluding volatile food and energy prices, the core CPI rose 3.4% YoY, lower than the previous value of 3.6% and the expectations of 3.5%, the lowest since May 2021. While economists have been expecting housing inflation to cool, it has been surprisingly stubborn, even as the prices of other goods have fallen. Stubborn shelter prices continued on an upward trend, rising by 0.4% for the fourth consecutive month. This persistent increase in shelter costs underscores ongoing pressure in the housing market. Rent and owners’ rent equivalent both rose by 0.4% MoM in May. Medical care prices rose by 0.5% in May after a 0.4% increase in April, with prescription drugs rising by 2.1%. Hospital services also rose by a noteworthy 0.5%.

Energy prices fell by 2% in May, primarily driven by a 3.6% decrease in the gasoline index. This decline in energy costs provided some relief to not only the headline CPI reading but also to consumers. The new vehicles index dropped by 0.5%, while the communication index, which measures telephone and internet services, decreased by 0.3%. Additionally, the recreation index declined by 0.2%. Indexes for apparel, household furnishings and operations, motor vehicle insurance and personal care all experienced declines. In terms of the US stock market, the S&P 500 index maintains a stable upward trend, and we expect the S&P 500 index to fluctuate between 5,300-5,600 points.

In terms of industry, accelerated computing and generative AI have hit the tipping point. As demand is surging worldwide across companies, industries and nations, the relative companies are expected to see continued revenue growth.

Broadcom(AVGO.US) specializes in manufacturing advanced networking chips that are used to move vast amounts of data by AI applications such as OpenAI’s ChatGPT. Revenue rose 43% YoY to US$12.94 billion in 2Q24, ahead of the US$12.03 billion market expectation. Its results were driven by strong demand for artificial intelligence-related chips and the integration of VMware, which was acquired late last year. Net profit came in at US$2.12 billion, compared to US$3.48 billion in 2Q23.

Revenue from the semiconductor solutions business unit, which houses both its networking and custom chip segments, increased by 6% YoY to US$7.2 billion in the quarter. Within that segment, US$3.1 billion in sales was attributed to AI chips. Revenue from the infrastructure software segment more than doubled in the quarter, to US$5.29 billion, driven by the acquisition of VMware, well ahead of the market expectation of US$4.6 billion. Looking ahead, Broadcom can leverage its strong relationship with hyperscalers such as Google and Meta Platforms Inc. to ignite further growth.It is recommended to buy at US$1683, target at US$1961, and stop loss at US$1614.

Nvidia(NVDA.US)Revenue in 1Q25 was a record US$26.0 billion, up 262% YoY and up 18% QoQ. In terms of business segment, Data Center revenue was up 427% YoY and up 23% QoQ to US$22.6bn, reflecting higher shipments of the NVIDIA Hopper GPU computing platform used for training and inferencing with large language models, recommendation engines, and generative AI applications. Gaming revenue increased by 18% YoY but dropped 8% QoQ to US$2.6bn. Automotive revenue amounted to US$329mn, up 11% YoY and up 17% QoQ, driven primarily by self-driving platforms. Professional Visualization revenue reached US$427mn, up 45% YoY, reflecting higher sell-in to partners following the normalization of channel inventory levels.

GPM stood at 78.4%, up 13.8 ppts YoY, primarily driven by the Hopper GPU computing platform. Net profit amounted to US$14.9bn, up 628% YoY and 21% QoQ. Looking forward to 2Q25, the Mgt remained positive and expected revenue to be US$28bn.It is recommended to buy at US$128, target at US$149, and stop loss at US$123.